|Credit Repair: Self-Help May Be
see the advertisements in newspapers, on TV, and on the Internet. You hear
them on the radio. You get fliers in the mail. You may even get calls from
telemarketers offering credit repair services. They all make the same
- "Credit problems? No problem!"
- "We can erase your bad credit—100%
- "Create a new credit
- "We can remove bankruptcies, judgments,
liens, and bad loans from your credit file forever!"
Do yourself a favor and save some money,
too. Don’t believe these statements. Only time, a conscious effort, and a
personal debt repayment plan will improve your credit report.
This brochure explains how you can improve
your credit worthiness and lists legitimate resources for low or no-cost
Everyday, companies nationwide appeal to consumers
with poor credit histories. They promise, for a fee, to clean up your
credit report so you can get a car loan, a home mortgage, insurance, or
even a job. The truth is, they can’t deliver. After you pay them hundreds
or thousands of dollars in up-front fees, these companies do nothing to
improve your credit report; many simply vanish with your
If you decide to respond to a
credit repair offer, beware of companies that:
- Want you to pay for credit repair
services before any services are provided,
- Do not tell you your legal rights and
what you can do—yourself—for free;
- Recommend that you not contact a credit
- Suggest that you try to invent a "new"
credit report by applying for an Employer Identification Number to use
instead of your Social Security Number; or
- Advise you to dispute all information
in your credit report or take any action that seems illegal, such as
creating a new credit identity. If you follow illegal advice and commit
fraud, you may be subject to prosecution.
You could be charged and prosecuted for
mail or wire fraud if you use the mail or telephone to apply for credit
and provide false information. It’s a federal crime to make false
statements on a loan or credit application, to misrepresent your Social
Security Number, and to obtain an Employer Identification Number from the
Internal Revenue Service under false pretenses.
Under the Credit Repair Organizations Act,
credit repair companies cannot require you to pay until they have
completed the promised services.
No one can legally remove accurate and timely
negative information from a credit report. But the law does allow you to
request a reinvestigation of information in your file that you dispute as
inaccurate or incomplete. There is no charge for this. Everything a credit
repair clinic can do for you legally, you can do for yourself at little or
no cost. According to the Fair Credit Reporting Act:
- You are entitled to a free copy of your
credit report if you’ve been denied credit, insurance or employment
within the last 60 days. If your application for credit, insurance, or
employment is denied because of information supplied by a credit bureau,
the company you applied to must provide you with that credit bureau’s
name, address, and telephone number.
- You can dispute mistakes or outdated
items for free. Ask the credit reporting agency for a dispute form or
submit your dispute in writing, along with any supporting documentation.
Do not send them original documents.
Clearly identify each item in your report
that you dispute, explain why you dispute the information, and request a
reinvestigation. If the new investigation reveals an error, you may ask
that a corrected version of the report be sent to anyone who received your
report within the past six months. Job applicants can have corrected
reports sent to anyone who received a report for employment purposes
during the past two years.
When the reinvestigation is complete, the
credit bureau must give you the written results and a free copy of your
report if the dispute results in a change. If an item is changed or
removed, the credit bureau cannot put the disputed information back in
your file unless the information provider verifies its accuracy and
completeness, and the credit bureau gives you a written notice that
includes the name, address, and phone number of the provider.
You also should tell the creditor or other
information provider in writing that you dispute an item. Many
providers specify an address for disputes. If the provider then reports
the item to any credit bureau, it must include a notice of your dispute.
In addition, if you are correct—that is, if the information is
inaccurate—the information provider may not use it again.
If the reinvestigation does not resolve
your dispute, have the credit bureau include your version of the dispute
in your file and in future reports. Remember, there is no charge for a
information generally can be reported for seven years, but there are
- Bankruptcy information can be reported
for 10 years;
- Information reported because of an
application for a job with a salary of more than $75,000 has no time
- Information reported because of an
application for more than $150,000 worth of credit or life insurance has
no time limitation;
- Information concerning a lawsuit or a
judgment against you can be reported for seven years or until the
statute of limitations runs out, whichever is longer; and
- Default information concerning U.S.
Government insured or guaranteed student loans can be reported for seven
years after certain guarantor actions.
The Credit Repair
By law, credit
repair organizations must give you a copy of the "Consumer Credit File
Rights Under State and Federal Law" before you sign a contract. They also
must give you a written contract that spells out your rights and
obligations. Read these documents before signing the contract. The law
contains specific protections for you. For example, a credit repair
- make false claims about their
- charge you until they have completed
the promised services; or
- perform any services until they have
your signature on a written contract and have completed a three-day
waiting period. During this time, you can cancel the contract without
paying any fees.
Your contract must specify:
- the payment terms for services,
including their total cost;
- a detailed description of the services
to be performed;
- how long it will take to achieve the
- any guarantees they offer; and
- the company’s name and business
Have You Been
Many states have laws
strictly regulating credit repair companies. States may be helpful if
you’ve lost money to credit repair scams.
If you’ve had a problem with a credit
repair company, don’t be embarrassed to report them. While you may fear
that contacting the government will only make your problems worse, that’s
not true. Laws are in place to protect you. Contact your local consumer
affairs office or your state attorney general (AG). Many AGs have
toll-free consumer hotlines. Check with your local directory
Need Help? Don’t
Just because you have a
poor credit report doesn’t mean you won’t be able to get credit. Creditors
set their own credit-granting standards and not all of them look at your
credit history the same way. Some may look only at more recent years to
evaluate you for credit, and they may grant credit if your bill-paying
history has improved. It may be worthwhile to contact creditors informally
to discuss their credit standards.
If you can’t resolve your credit problems
yourself or you need additional help, you may want to contact a credit
counseling service. There are non-profit organizations in every state that
counsel consumers in debt. Counselors try to arrange repayment plans that
are acceptable to you and your creditors. They also can help you set up a
realistic budget. These counseling services are offered at little or no
cost to consumers. You can find the office nearest you by checking the
white pages of your telephone directory.
In addition, nonprofit counseling programs
sometimes are operated by universities, military bases, credit unions, and
housing authorities. They’re also likely to charge little or nothing for
their services. Or, you can check with your local bank or consumer
protection office to see if it has a list of reputable, low-cost financial
Even if you don’t have a
poor credit history, it’s a good idea to conduct your own credit check-up,
especially if you’re planning a major purchase, such as a home or car.
Checking in advance on the accuracy of the information in your credit
report could speed the credit-granting process.
You’re entitled to one free report a year
if you can prove that:
- you’re unemployed and plan to look for
a job with 60 days;
- you’re on welfare; or
- your report is inaccurate because of
Otherwise, a credit bureau may charge you
up to $8.50 for a copy of your report.
Credit bureaus usually are listed in the
yellow pages of your telephone book under "credit reporting agencies."
Three large national credit bureaus supply most credit reports: TRW,
Equifax, and Trans Union. You may want to contact each of them for a copy
of your report.
|Experian (formerly TRW)
Allen, TX 75013
P.O. Box 740241
P.O. Box 1000